4 Jefferies Stealth Stock Picks for a Very Volatile Market

We are having trading days that some on Wall Street can become very scared of. Big moves up and down, with little or no real reason behind the selling other than more sellers than buyers. One thing is for sure, as pundits point to the “big back up” in Treasury yields, it is important to remember that the yield of the 30-year bond is just above the record lows printed back in February. Most likely the selling that is pushing yields higher is old-fashioned profit taking, in a Treasury market that is way overbought anyway.

We liked the list of Buy-rated stocks in a recent Jefferies research piece, as they are all good stealth plays. That is, they are top companies, under the radar, that have a big impact in their various sectors. Again, all are rated Buy at Jefferies, but it should be noted they are only suitable for aggressive growth accounts with reasonably good risk tolerance.

Gilead Sciences

This company is trading at an astounding multiple of less than seven times estimated 2016 estimated profits. Gilead Sciences Inc. (NASDAQ: GILD) discovers, develops and commercializes medicines in areas of unmet medical need in North America, South America, Europe and the Asia-Pacific. Its products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults; and Harvoni, Sovaldi, Viread and Hepsera products for the treatment of liver disease.

Second-quarter total revenues met consensus and earnings-per-share beat on strength in Sovaldi/HIV franchise. 2016 product sales guidance was lowered. HCV sales missed due to pricing, unfavorable payer mix, lower patient starts and shorter treatment duration. Share buybacks are expected to be lower for the rest of 2016, and many on Wall Street think that could suggest willingness for pipeline acquisitions.

Jefferies thinks that a spin-off of the hepatitis C silo of the business is entirely possible as the declining predictable revenues have weighed on the company’s overall valuation. While not a given, a transaction could improve long-term growth and improve the positive impact of a future acquisition or pipeline success.

Its investors receive a 2.41% dividend. The Jefferies price target for the stock is $91, and the Wall Street consensus figure is set at $105.24. The shares closed most recently at $78.06.

Teva Pharmaceuticals

This generic giant could be giving investors the best entry point in years. Teva Pharmaceuticals Industries Ltd. (NYSE: TEVA) is a leading global pharmaceutical company that delivers high-quality, patient-centric health care solutions. It is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products.

The company integrates its generics and specialty capabilities in its global research and development division to create new ways of addressing unmet patient needs by combining drug development capabilities with devices, services and technologies.

The company acquired Allergan’s generic-drug business for $40.5 billion in cash and stock to bolster its position as the world’s largest maker of generic drugs. Combined with the largest generic pipeline in the United States, and the possibility that 2016 emerges as the inflection year for generic approvals, the stock makes good sense for more conservative investors.

Teva investors are paid a 2.25% dividend. Jefferies has a $69 price target for the stock, while the consensus target is $68.77. The stock closed Tuesday at $51.54.